News
Friday, March 14, 2008
Board Approves Interim Financial Report and Prepares to Make $4 Million in Budget Cuts
Santa Barbara School Districts Board of Education approved the second interim financial report on the 2007-08 budget, giving it a negative certification, and is preparing to make $4 million in budget cuts in preparation for next year’s budget.
Twice each year, the board is asked to certify interim financial reports regarding the districts’ financial position and submit them to the Santa Barbara County Education Office for review and analysis. For each interim report, the districts must use multi-year projections to certify one of the following:
- Positive: that the districts can meet the current year and subsequent two-year obligations (i.e., the districts must, as a minimum, show a three percent reserve for this year, next year/2008-09, and the following year/2009-10);
- Qualified: that the districts may not be able to meet the current year and subsequent two-year obligations; or
- Negative: that the districts cannot meet the current year and subsequent two-year obligations.
The board self-certified the report as “negative” because the budget is currently projected to be in the red next year and the following year.
The multi-year financial projection rest on a series of assumptions, including but not limited to, forecasted levels of state funding, forecasted increases in personnel expense, and assumptions regarding the continued decline in student enrollment. In the event that some of the assumptions do not materialize as expected, the multi-year financial projection could change as well.
On December 11, 2007, the board was presented with the First Interim Financial Report. The report indicated that due to significant declining enrollment in the high school district, coupled with the compounding effect of multi-year salary agreements, the districts would need to reduce expenditures by at least $1.5 million in the 2008-09 fiscal year to achieve a balanced budget. At this point in time, the districts’ self certified their First Interim Financial Report as “qualified,” meaning that they may not be able to meet their current and subsequent two year obligations, under the auspices of Assembly Bill 1200.
On January 10, 2008, the governor unveiled his proposed fiscal year 2008-09 budget. Based on the assumptions included in the governor’s budget proposal, School Services of California (SSC) prepared their own multi-year projection which showed that the structural deficit (i.e., the imbalance between ongoing revenues and expenditures) had grown to roughly $6 million, and that the districts would have to cut, at a minimum, $4 million, going into next year.
In response to the governor’s proposal, the superintendent instituted a spending freeze on all non-essential items and the districts are only filling personnel vacancies on a mission-critical basis. Moreover, recognizing that any dollar saved this year will improve our financial outlook next year, the administration has implemented a number of measures in the current year to increase the districts’ ending fund balance.
On March 11, 2008, the board was presented with the Second Interim Financial Report.
During that presentation, Deputy Superintendent Eric D. Smith indicated that the projected ending fund balance had increased by in excess of $600,000; however, the structural deficit of roughly $6 million dollars in fiscal year 2008-09 remained. Based on this information, the board self-certified their Second Interim Financial Report as “negative,” meaning (absent board approved expenditure reductions of at least $4 million) the districts can not meet their current and subsequent two-year fiscal obligations.
Exercising their fiscal oversight authority under Assembly Bill 1200, the Santa Barbara County Education Office is not only requiring that the districts encumber all contracts and obligations for the current year but is also requiring that we provide them with a proposal for addressing the fiscal condition of the districts (i.e., the Fiscal Recovery Plan) and updated financial projections for fiscal years 2008-09 and 2009-10 that reflect the actions of the board to implement the Fiscal Recovery Plan.
With this in mind, the board has adopted the following timeline for fiscal year 2008-09 budget reductions:
- public hearing and first reading of Fiscal Recovery Plan (April 8, 2008);
- second and final reading of Fiscal Recovery Plan (April 22, 2008);
- board approval of Third Interim Financial Report and updated multi-year projections (May 27, 2008).
The final adoption of the districts’ budget is scheduled for June 24, 2008.